Executive Business Briefing

Here is a look at more of Wednesday's top business stories:

Fed's monetary policy supportive of a recovery

READING, Pa., Aug. 21 (UPI) -- Federal Reserve Bank of Philadelphia President Anthony Santomero said the Fed's current monetary-policy stance is appropriately supportive of the recovery process.

"My outlook for the national economy is cautiously optimistic," Santomero said.

"Still, the recovery is more modestly paced than we had hoped, and it is still subject to more risks than we would like," he said.

"I believe the Fed's current monetary policy stance is appropriately supportive of the recovery process," Santomero said, suggesting that Fed policymakers see little need to cut interest rates in the near term despite concerns the economy could fall back into recession.

"At some point, prudence will dictate that we begin moving monetary policy back toward a more neutral stance, but in the near term, given the uncertainties surrounding the economic outlook, the proper pace and pattern of future monetary-policy actions are difficult to predict," Santomero said.

Last week the Fed's Open Market Committee downgraded its assessment of the economy and said further weakness was the greatest danger. But the FOMC also said low interest rates and productivity growth should foster a business recovery.

The Fed's benchmark federal funds rate currently stands at a 41-year low of 1.75 percent.

Santomero also said he expected a slow acceleration in economic activity the rest of the year with "healthy growth" in 2003. He also said that he does not expect consumer spending to diminish as a result of the plunge in the stock market in July.

He said the stock market now appears to be beginning to stabilize, and "barring further sharp declines, I expect the recovery to continue, though perhaps at a slower pace than we were expecting only a few months ago."

Santomero, a voting member of the policy-setting Federal Open Market Committee, was speaking to the United Way of Berks County in Pennsylvania.

AT&T sells stake in TWE

NEW YORK, Aug. 21 (UPI) -- AT&T Corp. said it has agreed to sell its minority stake in the Time Warner Entertainment joint venture to partner AOL Time Warner Inc. in exchange for cash, AOL stock and shares in a publicly traded cable business.

AT&T has also agreed to give AOL's Internet service access to its cable networks, giving the Internet and media giant a much-needed pipeline for its high-speed service.

The complex agreement ends more than eight years of negotiations, which languished amid disagreements over price, the venture's complex mix of businesses, and the two partners' own financial constraints.

Under the deal, AT&T will receive $2.1 billion in cash and $1.5 billion in AOL common stock in exchange for its 27.6 percent stake in TWE, which includes the Warner Bros. film studio, Home Box Office cable network and most of Time Warner Cable.

AT&T also will get a 21 percent stake in a cable TV business, Time Warner Cable, that AOL plans to take public. The cable unit serves about 10.8 million subscribers.

AT&T has said the deal will help it cut its debt load and strengthen its balance sheet as it prepares to sell its cable TV business, AT&T Broadband, to Comcast Corp. later this year.

C. Michael Armstrong, AT&T chairman and chief executive officer, said, "This agreement will turn a non-strategic investment into cash that we can use to pay down debt.

"That has been the goal since we acquired our stake in Time Warner Entertainment and I'm delighted we were able to accomplish it on favorable terms for everyone involved."

AT&T said it intends to place in trust the AOL Time Warner common stock, as well as the economic and voting interest in Time Warner Cable.

The deal requires certain regulatory approvals and is expected to close in the first half of 2003.

AT&T acquired its stake in TWE as part of its June 2000 acquisition of the MediaOne Group.

In February of 2001, AT&T requested that TWE convert the limited partnership into a corporation and create equity securities for registration with the Securities and Exchange Commission.

On July 30, the two companies agreed to suspend the registration process to explore alternative approaches.

Starbucks goes cyber

SAN FRANCISCO, Aug. 21 (UPI) -- Starbucks Coffee Co. said it has launched customers into cyberspace at some 1,200 of its coffee shops via a wireless Internet access system.

The coffee shop operator has surrounded the shops with a local area network supplied by partners T-Mobile, the wireless division of Germany's Deutsche Telekom AG and computer maker Hewlett-Packard Co.

Starbucks said it aims to open a total of 2,000 cafes with the wireless Internet access in the United States as well as Europe, including Berlin and London, by the end of the year.

The network uses the WiFi communications standard that allows computers with the correct equipment within a short distance of the network hub to log into the Internet.

Corporations and many homes have rushed to build wireless networks using WiFi, the common name for the wireless 802.11b standard, but the promise of networks in public places has been slow to develop.

Hewlett-Packard is offering free software and T-Mobile International will act as the Internet Service Provider for a fee, but will give free 24-hour trials to first-time users.

Howard Schultz, Starbucks chairman and chief global strategist, said, "This service is a natural extension of the Starbucks coffeehouse experience, which has always been about making connections with the people and information that are important to us over a cup of coffee.

"Mobile professionals across the globe have been waiting for just such an offering: high-speed wireless Internet access in a familiar and widely available location that keeps them connected while on the road, or between the home and office. It's the right service offered in the right environment," Schultz said.

Starbucks said the service is available at it stores in Atlanta; Austin, Texas; Boston; Connecticut; Denver; Dallas-Fort Worth; Houston; New York; New Jersey; Philadelphia; Portland, Ore.; the San Francisco Bay area; and the Seattle-Puget Sound region.

Additionally, stores in southern California, including Los Angeles, as well as Chicago, Maryland, Pittsburgh, Virginia and Washington, are scheduled to be enabled before the end of the calendar year.

The service is also available in select Starbucks stores in London and Berlin. Additional cities will be added to the European pilot over the next several months.

To connect, customers need a T-Mobile HotSpot account and Wi-Fi capability for their notebook computer or Pocket PC. To log in to the service and establish a connection, customers with a properly configured notebook or Pocket PC simply need to launch their Internet browser from within a participating Starbucks and login.